Bloomberg News

Deutsche Bank, BNP May Be Cut by S&P in European Credit Review

December 09, 2011

Dec. 8 (Bloomberg) -- Deutsche Bank AG and BNP Paribas SA are among European lenders that were placed on CreditWatch negative by Standard & Poor’s amid a similar review of 15 countries in the region.

“We intend to resolve the CreditWatch placement on these banks soon after the resolution of the CreditWatch placement on the related sovereign,” S&P said yesterday in a statement.

S&P said earlier this week that Germany and France may be stripped of their top credit ratings, and yesterday put the European Union’s AAA rating on CreditWatch negative. The euro area’s six AAA-rated countries were among the nations placed on a negative outlook, and their credit ratings may be cut depending on the result of a summit of EU leaders this week, S&P said on Dec. 5.

Other firms placed on CreditWatch negative include Frankfurt-based Commerzbank AG, Milan-based UniCredit SpA and French lenders Credit Agricole SA and Societe Generale SA. The ratings company said similar actions on other large European banks will follow.

Deutsche Bank’s rating may be cut one-notch and likely will mirror the action on Germany’s rating, S&P said.

S&P said it likely would downgrade BNP Paribas’s rating by one notch if it cut the rating on France by more than one level. If France’s rating is maintained or cut one notch, BNP’s rating likely will be affirmed, the ratings company said. S&P said it likely would downgrade Credit Agricole or SocGen with a one- notch cut in France’s rating.

Sarkozy, Merkel

S&P said it intends to resolve the CreditWatch for Deutsche Bank and the three biggest French banks within four weeks of any decision on the home nation’s rating.

French President Nicolas Sarkozy and German Chancellor Angela Merkel proposed amending European treaties to tighten rules on deficit spending and water down provisions demanding investor losses. In a joint letter to European Union President Herman Van Rompuy, the leaders said they want a decision at an EU summit starting today so the measures can be ready by March.

The European Central Bank may announce an array of steps today to stimulate bank lending, said three euro-area officials with knowledge of policy makers’ deliberations. Options on the table include loosening collateral criteria and offering banks longer-term loans to grease the flow of credit to the economy, and two of the officials said an interest-rate cut is likely.

S&P downgraded the U.S.’s AAA credit rating by one level to AA+ for the first time Aug. 5, citing the nation’s political process and criticizing lawmakers for failing to cut spending or raise revenue enough to reduce record budget deficits. Treasuries still rallied after the rating cut, posting their best quarter since 2008.

--Editors: Peter Eichenbaum, David Scheer

To contact the reporter on this story: Michael J. Moore in New York at mmoore55@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net


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